(Solved): The Nolan Corporation finds that it is necessary to determine its marginal cost of capital. Nolan's ...

The Nolan Corporation finds that it is necessary to determine its marginal cost of capital. Nolan's current capital structure calis for 35 percent debt, 25 percent preferred stock, and 40 percent common equity. Initially common equity will be in the form of retained earnings \( \left(k_{e}\right) \) and then new common stock \( \left(k_{n}\right) \). The costs of the various sources of financing are as follows: debt, \( 6.2 \) percent: preferred stock, 8 percent, retained eamings, 11 percent; and new common stock, 122 percent. o. What is the initial weighted average cost of capital? (include debt, preferred stock, and common equity in the form of retained earnings, \( k_{e} \) ) (Do not round intermediate colculations. Round the final answer to 2 decimal places.) Weighted average cost of capital b. If the firm has \( \$ 28 \) million in retained eamings, at what size of investment will the firm run out of retained earnings? (Enter the answer in millions.) Capital structure size \( (X) \quad \$ \quad \) milion c. What will the marginal cost of capital be immediately after that point? (Equity will remain at 40 percent of the capitat structure, but it will all be in the form of new common stock, \( k_{n} \) ) (Do not round intermediote calculations. Round the final answer to 2 decimal ploces.) Marginal cost of capital d. The 62 percent cost of debt referred to above applies only to the first \( \$ 42 \) milion of debt After that the cost of debt will be \( 8.2 \). percent At what size of investment will there be a change in the cost of debt? (Enter the answer in millions.) Capital structure size (Z) \( \$ \) million e. What will the marginal cost of capital be immediately after that point? (Consider the focts in both parts cand \( d \) ) (Do not round intermediate calculotions. Round the final answer to 2 decimal ploces.) Marginal cost of capial